Pension auto-enrolment: how it works

What is pension auto-enrolment?

Since October 2012, employers have had to enrol their staff into workplace pension schemes as part of a government initiative to get people to save more for retirement.

It is now compulsory for employers to automatically enrol their eligible workers into a pension scheme. The employer must also pay money into the scheme.

This guide explains everything you need to know about pensions auto-enrolment - from how much you pay in, when it applies to you, and how auto-enrolment affects your pay.

Who is eligible for auto-enrolment?

You will be automatically enrolled into your work's pension scheme if you meet the following criteria:

• You aren't already in a qualifying workplace scheme;
• You are aged at least 22;
• You are below state pension age;
• You earn more than £10,000 a year in 2024-25;
• You work in the UK.

Do I need to join the auto-enrolment pension scheme?

You don't have to, but opting out isn't usually a sensible decision as you'll lose out on employer contributions.

You can opt-out at any time you want to. If you opt out within the first month, your payments will be refunded in full.

If you opt-out after the first month, any payments you've made will stay in your pension pot.

Opting out isn't final - you can re-join at a later date. Also, employers will be required to re-enrol you every three years, so you can reconsider your decision.

Auto-enrolment: how much do I contribute?

There are minimum contributions that you and your employer must pay. Minimum contributions have increased over time.

Both you and your employer can choose to contribute greater amounts to the pension if you wish.

If your employer contributes more than its required minimum amount - but less than the total minimum amount - you only need to make up the shortfall between the total minimum and the employer contribution.

• Find out more: you can use the Money Helper workplace contribution calculator to help you work out how much you'll pay into your pension and the tax relief you'll get on contributions.

Auto-enrolment contribution rates 

Our table highlights what the different parties have contributed to auto-enrolment pensions over the years.

How do I opt out of pensions auto-enrolment?

Opting out involves getting an opt-out form from your pension provider or doing so via an online account.

You can get contact details of the pension company from your employer.

If the form is completed and returned to your employer within one month of being automatically enrolled, any money you have paid into the pension will be refunded, otherwise the money will be held into the scheme until you can access it.

How does auto-enrolment 'qualifying earnings' work?

Your minimum contribution applies to anything you earn over £6,240 up to a limit of £50,270 (in the tax year 2024-25). This includes overtime and bonus payments.

If you were earning £25,000 a year, your contribution would be a percentage of £18,760 (the difference between £6,240 and £25,000).

It's down to your employer to confirm how much of your earnings you'll need to contribute.

What if I am in a workplace pension scheme already?

If you are an existing member of a workplace pension scheme and it meets certain minimum standards (ie it is a 'qualifying scheme'), you will not be affected by automatic enrolment.

However, if contribution levels fall below the minimum contributions for an automatic enrolment scheme, you and/or your employer may need to start or increase contributions.

What is a qualifying workplace pension scheme for auto-enrolment?

Your employer's pension scheme must meet some minimum criteria before an employer can automatically enrol workers.

Schemes can be UK-based or a non-UK scheme, they must be tax registered and need to meet minimum requirements that vary according to the type of pension scheme.

Qualifying schemes can be either defined benefit or defined contribution pension schemes.

Auto-enrolment: what if I have more than one job?

For people with more than one job, each job is treated separately for automatic enrolment purposes. You can still opt out of individual schemes if you want.

Each of your employers will check whether you're eligible to join their pension scheme. If you are, then you'll be automatically enrolled in that employer's workplace pension scheme.

Can I transfer old pensions to my employer's pension scheme?

Most other pension schemes may accept transfers in, but there may be a minimum value that they accept. You should check this with the scheme's administrator to find out about transfers.

You can find out more about your options in our guides to auto-enrolment pension providers:

• Nest
• Now: Pensions
• People's Pension
• Smart Pension

Does auto-enrolment apply to me if I'm self-employed?

Self-employed workers aren't automatically enrolled into a pension scheme. It's still sensible for you to plan for your retirement and open a pension plan.

You can opt for a personal pension or a self-invested personal pension (Sipp) to invest your retirement savings.

You'll get a contribution from the government in the form of pension tax relief - 20% for basic-rate taxpayers or 40% for higher-rate taxpayers.